Beverly Enterprises offers web - based procurement. (Feature Article).

Early this year the long-term care megachain, Beverly Enterprises, expanded its own Internet-based purchasing system to make it available to small-to-medium-sized nursing facility chains throughout the United States. In concept, the new organization, called CERES Strategies, combines the purchasing power of Beverly with some operational twists differentiating it from the typical group purchasing organization (GPO). Recently its senior director of procurement, Lisa Huckelbury, expounded on the new organization in an interview with Nursing Homes/Long Term Care Management Editor Richard L. Peck.

Peck: Why did Beverly Enterprises decide to move in this direction?

Huckelbury: Our profession as a whole is hurting. With a goodly portion of the Medicare cliff still looming, and facilities either in bankruptcy or close to it, we thought that we could at least offer a way to save money on the procurement side. Essentially, we're offering something to small-to-medium-sized chains that they won't be able to get with the typical GPO.

Peck: How does this approach differ?

Huckelbury: During our 12 months of due diligence prior to starting CERES, we found that the typical nursing home belongs to three GPOs, and the facility routinely picks and chooses among the GPOs' product offerings in a very laborious, manual fashion. On the other hand, the system we've used at Beverly for some time is an Internet-based, "point-and-click" procurement method, offering 24-hour access to purchasing reports and data, going into any degree of detail the administrator wants.

But there are other differences. Under our system, we carry the receivables. The facility or central office orders online, the vendor drop-ships the items to the facility and then bills CERES. After paying the vendor, CERES consolidates all the invoices on a weekly basis and bills the facility or chain, plus also adding a management fee based on 6% of the cost of goods. The advantages for the vendors are not having to carry the receivables and gaining access to high-volume purchasers; the advantage for the customers is a highly simplified and less costly approach to purchase management. Imagine if you had a 20-facility chain with each facility averaging 200 invoices a week at $35 to 50 an invoice for processing. We are getting rid of all of that.

Beyond that, administrators can get detailed purchasing reports and trend analyses on all facilities in the chain, and besides that, don't have to worry about contracting with vendors or price matching their bills against their orders.

Peck: What would a facility or chain need to get involved with this?

Huckelbury: Basically, each facility would need a dedicated computer with Internet access and a printer. We're finding that practically all facilities these days have computers and Internet access because of their Minimum Data Set (MDS) processing requirements. But these computers are usually tied up for that purpose. So what we're finding, interestingly, is facilities wanting to purchase the computer hardware from our vendors, as well, making this a turnkey operation. As part of that we do a lot of computer training, which is included in the fee.

Peck: Are there other points of difference for CERES?

Huckelbury: Unlike many GPOs, we don't have purchase minimums--for example, the customer doesn't always have to order from CERES or even have to meet a fixed percentage of ordering. If the customer wants to purchase laundry chemicals, copy machines, and medical supplies from CERES, but chooses to purchase therapy supplies or food from somewhere else, that's fine.

Peck: What sorts of vendors does CERES do business with?

Huckelbury: CERES chooses vendors that have passed a stringent product review process, which means that all products CERES offers meet predictable needs and established quality standards. We review hundreds of healthcare products every year according to medical and clinical standards, as well as their value to risk management and safety and loss control. From an e-commerce standpoint, the backbone of our operation is Direct Supply Healthcare Equipment. The upshot is that smaller operators can begin to save more on purchasing--as much as 20 to 30%--and that's after paying our management fee.

Peck: It's interesting that Beverly would help its competitors in this way.

Huckelbury: We don't see them as competitors, unless we compete in a local nursing home market. We believe we can provide smaller operators with a first-class formulary, or let them design their own formulary at a better price, therefore saving them money. This is the same basic approach Beverly takes with AEGIS Therapies, which provides rehabilitative therapy services both to Beverly facilities and other providers. CERES is an extension of that approach.

For further information, contact CERES Customer Service at [phone].